The geopolitical turbulence in the Middle East is causing significant disruptions in oil supplies, raising concerns about inflation. This situation has prompted countries in Southeast Asia to take urgent measures to tackle the emerging energy crisis. The slowdown in tanker traffic through the Strait of Hormuz has severely impacted the flow of oil and gas to Asia.
According to analysts, there is a possibility that oil prices could exceed $100 per barrel if the current disruption in tanker flow is not resolved soon. This prospect is causing concern, particularly in Jakarta, given Indonesia’s status as a net energy importer. In response, Southeast Asian nations are hastening efforts to decrease their reliance on imported oil, focusing more on renewable energy sources with increased urgency.
Danantara’s Challenge
Indonesia is facing the challenge of managing the current energy shock, which will require both sound fiscal policies and a proactive approach from the Danantara Sovereign Wealth Fund (SWF). As one of the world’s largest SWFs by claimed assets, Danantara is now tasked with proving its worth by potentially spearheading a long-term shift to renewable energy.
Despite the Indonesian government’s apparent indifference, with senior officials reportedly downplaying the risk of an energy crisis, Danantara’s success in initiating a lasting transition to renewable sources could significantly reduce the nation’s dependence on imported fuel. However, the transition from coal to renewables faces challenges related to feasibility and governance.
Indonesia’s Solar Ambitions
During Danantara’s anniversary event in March, President Prabowo Subianto announced an ambitious goal of installing 100 gigawatts of solar power capacity within two years. He also initiated a special task force focused on renewable energy and energy conservation to drive this initiative.
As reported by local media, the president described the 100 gigawatts target as a strategic move to expedite Indonesia’s energy transition and lessen its dependence on imported fossil fuels, which have become more expensive due to the US-Israeli conflict with Iran. Although this target was proposed in 2025, the current situation has given it renewed urgency and explicit support from the president.
At a ceremony inaugurating renewable energy projects across 15 provinces in June 2025, President Prabowo emphasized solar energy as crucial for achieving energy independence, particularly in remote areas.
In August 2025, Energy Minister Bahlil Lahadalia outlined the government’s plan to electrify 5,700 villages and 4,400 hamlets by 2030. According to Bahlil, these villages will be equipped with solar power plants in partnership with the private sector and state utility company Perusahaan Listrik Negara (PLN). The plan involves 80 gigawatts of distributed solar photovoltaic (PV) systems and 320 gigawatt-hours of Battery Energy Storage Systems (BESS), under the management of Merah Putih Village Cooperatives (KDMP), along with 20 gigawatts of centralized solar.
Legal and Logistical Hurdles
Indonesia’s solar ambitions face legal challenges and questions about the government’s execution capabilities. While the Constitutional Court mandates state control over electricity, the village solar initiative leans toward an “unbundled” model separating generation, transmission, distribution, and retail into distinct entities. This legal tension could impact community projects and the program’s success.
Furthermore, the government’s capacity to implement large-scale programs has been scrutinized, with past initiatives like the Free Nutritious Meals (MBG) program serving as a cautionary tale. Despite the potential, over 21,000 reported cases of food poisoning linked to the MBG program highlight the risks of poorly executed projects.
Investment and Uncertainty
The solar initiative has attracted new investment, yet details remain sparse. Danantara announced a $1.4 billion investment to boost solar power development, but specifics on the funds’ origin, the facility’s nature, location, and technology were not disclosed.
CEO Rosan P. Roeslani mentioned that the investment was part of the 100 gigawatts effort initiated in 2025, with construction expected to take 18 months. Despite the lack of detail, this investment is timely, signaling Indonesia’s commitment to its energy transition amid global energy strains.
Crisis as a Catalyst for Change
Escalating fuel costs are compelling Jakarta to act, but converting this crisis into sustainable change requires more than just momentum. While the government might resist immediate price increases for subsidized fuel, persistent Middle East conflicts could force tighter quotas and price adjustments. This pressure creates a political opportunity for a robust transition to renewables, reducing reliance on global supply chains.
Indonesia’s Energy Transition Path
Indonesia has made promises in the realm of clean energy, but the road ahead requires concrete actions. Despite ambitious targets, skepticism remains due to slow progress and conflicting policies. President Prabowo has pledged to retire coal plants within 10 to 15 years and shift to 100% renewable energy within a decade, aligning with Indonesia’s net-zero emissions goal by 2060.
To achieve energy sovereignty, Indonesia should capitalize on local resources, making its energy infrastructure immune to Middle East price fluctuations. Policy alignment and investment in storage and grid upgrades are essential to harness solar and wind energy effectively.
Original Story at www.fairobserver.com